Multi-employer defined contribution schemes in the UK must apply for authorisation from the country’s regulator from today under a new law brought in last year.

The Pensions Regulator (TPR) said 30 such schemes – known as master trusts – had either stopped their services or were in the process of doing so as they were unable to comply with the stringent new rules.

That left 58 providers – including funds such as NEST, the People’s Pension and NOW: Pensions – with a six-month window to apply for authorisation.

Each master trust must prove they have “fit and proper” staff, sufficient financial reserves and “robust” systems, processes and protections.

Nicola Parish, executive director for frontline regulation at TPR, said: “The success of automatic enrolment has led to rapid growth in master trusts. Authorisation and supervision is vital to ensure 10m savers can have confidence that their retirement savings are safe.”

Nicola Parish, executive director, The Pensions Regulator

Nicola Parish, executive director, TPR

Trustees of master trust schemes were responsible for reviewing TPR’s new guidance and code of practice to ensure they were ready for authorisation, Parish added.

Malcolm McLean, senior consultant at Barnett Waddingham, said: “Some master trusts are too small to be economically viable, while in other cases there have been claims of malpractice.

“We should welcome, therefore, a new regime which seeks to stabilise a market that may be dangerously out of control and hope and expect TPR will be able to weed out all schemes that fall short of the minimum standards required.”

Joel Eytle, pensions legal director at DLA Piper, added that the new regime would place “a much more active and onerous obligation” on TPR to oversee master trusts and ensure ongoing compliance with the new law.

“The concerns are whether the regulator will have sufficient resources to effectively police the regime, and whether the obligations on master trusts will prove too onerous and deter entrants to the market,” he said.

“It will also be important for traditional multi-employer schemes with participating employers who are not in the same corporate group to take legal advice on whether they would be classified as a master trust, as this would mean that they would now need to be authorised under the new legislation.”


Sharon Bellingham, senior consultant at Hymans Robertson, said the authorisation regime would drive consolidation among DC master trusts.

She said: “Looking ahead, it’s pretty interesting to think about [how] the market might look like 12 months from now – survival of the fittest and most committed, who might ship out ahead of the new authorisation regime and who might try but not make it.

“It doesn’t take much crystal ball gazing to see that the consolidation already happening will gain pace.

“It’s absolutely key to ensure that individuals are protected at all times and it’s also important to avoid chaotic market exits that may dilute confidence in the master trust brand.  What we’ve seen so far has been controlled and measured, which is exactly how it should be.”

In April, the People’s Pension – one of the UK’s biggest master trusts with more than 4m members – acquired Your Workplace Pension, a £20m (€22.5m) DC fund.

The same month, the Salvus Master Trust acquired the smaller Complete Master Trust, boosting its assets above £100m.